Krones Warns of Profit Drop Over Le-Nature’s Fraud

German-based packaging machinery maker Krones AG announced it is in mediation talks with U.S.-based finance companies seeking compensation over the firm’s alleged participation in a large-scale fraud by U.S.-based Le-Nature’s bottling company.

The company said it has taken a first step toward resolving the legal disputes that have been ongoing since October 2008, triggered by claims for damages by several American financial service providers, a group of hedge funds and a liquidation trustee.

In its statement, Krones said initial assessments from the mediation process indicate that the possibility cannot be ruled out that potential settlements developing from the mediation could have an adverse effect on the Krones Group’s profit situation, quantified as a low-to-medium double-figure million U.S. dollar amount.

The lawsuits are related to the financial scandal involving the bankruptcy of the U.S. company Le-Nature’s, whose former directors meanwhile have been convicted of fraud. In 2005/2006, Krones produced, delivered and successfully commissioned filling lines representing a contract volume of approximately $100 million for the Le-Nature’s facility in Phoenix, AZ.

The company said several plaintiffs have entered into a mediation process with Krones to explore options for ending the proceedings. Although in Krones’ view the opposing parties’ demands are unfounded, Krones’ U.S. attorneys have advised to continue mediation, also with regard to the special risks entailed by the American legal system.